This blog runs parallel to a new poetry blog 'Poetry Pinfold' (poetrypinfold.blogspot.com), and a new blog with poems in Dutch (bartnooteboomgedichten.blogspot.com)

Monday, March 16, 2015

189.
Decentralization and self-organization

Here
I use the notion of scripts to clarify the difference between decentralization
and self-organization.

In
decentralization, the overall structure (script) imposes minimal constraints on
the components (nodes), delegating responsibility for their functioning, and
yielding openness, allowing for alternative ways of ‘filling in’ the node. For
example, teams are allowed a wide discretion in what they do and how they do
it.

The
advantage of this is that one takes into account that the nodal activity is a
specialism that one engages because one does not oneself have the capability to
perform it. Then it is odd to claim, nevertheless, that one can effectively monitor
and control the activity from outside.

The
next step is to apply ‘horizontal control’. Here one asks the nodal activity to
propose how it is to be evaluated or controlled. This ensures that points of
control are minimal, since the node wants minimal outside interference, and for
the controller it minimizes cost of control. They are also effective, since
they arise from the shop floor. If there is cheating in this, control falls
back on full top down, outside control. I will discuss this in more detail in a
later series on economics and markets.

Self-organization
goes further than decentralization. There, nodes develop by themselves and subsequently
seek partners to utilize opportunities for combinations and complementarities.

The
nodes don’t follow the script, but vice versa: scripts emerge from interacting nodes,
in connections that are more or less durable.

One
should not overestimate, let alone romanticize, self-organization. As I argued
in preceding items in this blog a combination is needed of unity and diversity,
of the script perspective and the node perspective. The challenge is to forge
minimal unity needed while allowing scope for diversity.

In
a book[i] I proposed to see
organization as a ‘focusing device’, while maintaining adequate scope for
‘cognitive distance’. The more innovative an organization is to be, the more
scope for variety it needs. It can also access variety in collaboration with
others, at a larger cognitive distance.

Some
interdependencies do require integration or close coordination and alignment.
This is illustrated by the failure of the separation, in the Netherlands, of a
privatized organization for operating trains and a public organization for the
rail infrastructure. They are operationally too connected to allow for that.

Also,
as discussed earlier, in item 59 of this blog, there is a need for a certain durability
of connections when those require investments that are ‘specific’, i.e. can be
recouped only in that particular connection or relationship. Those will be made
only when there is a perspective for a sufficient duration or volume to recoup
the investment. One should go not for maximum but for optimal flexibility of
configuration: durable enough for depth of collaboration, flexible enough to prevent
rigidity.

The
most extreme case of self-organization is the ideal market, without any outside
coordination, with Adam Smith’s invisible hand’ of competition.

However,
when specific investments require some minimal duration of joint activity, this
entails temporary exclusiveness, limiting competition, which is then forbidden
by competition authorities.

The
perverse effect of that is that it yields an incentive to integrate the
activities into an overarching organizational script, by merger or acquisition,
which takes out the advantages of self-organization.

However,
self-organization may produce undesirable effects. Worse, it may yield what
earlier I called a ‘system tragedy’, where activities are integrated in scripts
of interdependence, joint lobbying, imitation, complicity, and mutual
protection, or hiding behind each other, with a loss of traceable and
attributable responsibility, with everybody pointing to everybody else.

A
salient example is the banking sector, generating economic crises. I discuss
that in more detail in the next item.

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